News Release

Alliance HealthCare Services Reports Results for the Second Quarter and Six Months Ended June 30, 2017

IRVINE, Calif.--(BUSINESS WIRE)--Aug. 3, 2017--
Alliance HealthCare Services, Inc. (NASDAQ: AIQ) (the “Company,”
“Alliance,” “we” or “our”), a leading national provider of outsourced
radiology, oncology and interventional services, announced today the
results for the quarter and six months ended June 30, 2017.

Second Quarter and Year-to-Date 2017 Highlights

The Company reported revenue totaling $137.3 million for the second
quarter, a $11.9 million or 9.5% increase over the second quarter of
last year, and $267.2 million year-to-date, a $18.2 million or 7.3%
increase over prior year.

The Company generated $38.2 million of Adjusted EBITDA (as defined
below) for the quarter, a $3.8 million or 10.9% increase from the
second quarter of last year, and $71.0 million year-to-date, a $6.2
million or 9.5% increase over prior year.

The Company continued to generate strong cash flow with $29.6 million
in quarterly operating cash flow and $49.5 million of year-to-date
operating cash flow.

Adjusted Net Income Per Share (as defined below) was $0.43 for the
quarter, representing an increase of $0.06 per share, or 16.2%, from
the second quarter of last year. Adjusted Net Income Per Share (as
defined below) was $0.60 year-to-date, representing an increase of
$0.18 per share, or 42.9%, from the first half of last year.

Alliance Radiology revenue increased by 1.8% to $89.1 million for the
quarter and by 2.2% to $176.9 million year-to-date.

Alliance Oncology revenue increased 31.4% to $33.9 million for the
quarter and by 23.3% to $64.0 million year-to-date.

Alliance Interventional revenue increased by 21.3% to 13.8 million for
the quarter and by 10.5% to $25.5 million year-to-date.

The Company closed with a total leverage ratio, calculated pursuant to
its Credit Agreement, of 3.95 to 1.00 as of June 30, 2017.

2017 Financial Results

“As outlined with our guidance for the year and consistent with our 2017
expectations, our team continued to deliver solid growth in both revenue
and Adjusted EBITDA sequentially and year-over-year. When compared to
the second quarter of 2016, Adjusted EBITDA increased by 10.9%, and
Adjusted Net Income Per Share increased by 16.2% to $0.43. We continue
to make progress in reducing our long-term debt, which is down $11.3
million compared to December 31, 2016,” stated Tom Tomlinson, Chief
Executive Officer and President of Alliance HealthCare Services.
“Although we continued to experience same-store volume challenges in our
Radiology MRI segment and our Oncology SRS segment, the strengthening
that began in the first quarter has continued into the second quarter,
and same-store volumes in our Radiology PET/CT segment and our Oncology
Linac segment have continued to show positive growth. Within each of our
businesses, year-over-year and sequential revenue growth continues as
our team focuses on enhancing our value proposition and improving our
competitive position. We remain confident that we will deliver results
for 2017 that are consistent with guidance provided to investors,”
continued Mr. Tomlinson.

Revenue for the second quarter of 2017 increased to $137.3 million,
compared to $125.3 million in the second quarter of 2016. This increase
was primarily due to increases in Radiology, Oncology and Interventional
revenue of $1.6 million, $8.1 million and $2.4 million, respectively.

Revenue for the first half of 2017 increased to $267.2 million, compared
to $249.0 million in the first half of 2016. This increase was primarily
due to increases in Radiology, Oncology and Interventional revenue of
$3.7 million, $12.1 million and $2.4 million, respectively.

Adjusted EBITDA for the second quarter of 2017 increased 10.9% to $38.2
million, compared to $34.4 million in the second quarter of 2016, and
9.5% for the first half of 2017 to $71.0 million from $64.8 million in
first half of 2016. The increase was primarily due to increases in
earnings from Radiology, Oncology and Interventional, partially offset
by Corporate investments. Adjusted EBITDA growth in both Radiology and
Oncology was driven by period-over-period same-store volume growth in
PET/CT as well as the addition of new partnerships such as the Northern
Alabama Cancer Care Network. Adjusted EBITDA growth in Interventional
was primarily driven by increases in mix of the procedures performed in
Alliance’s new Ambulatory Surgical Centers (“ASCs”), which were
partially offset by additional expenses related to new ASC capacity as
well as platform investments made to strengthen management and
development capabilities. Corporate / Other Adjusted EBITDA decreased
due to additional investments in international expansion as well as
organization, systems and infrastructure to support expanded workforce,
entities and partnerships.

GAAP net (loss) for the second quarter totaled $(0.3) million, compared
to net income of $2.5 million in the second quarter of 2016. The $2.8
million decrease in income is largely due to $3.8 million of incremental
Adjusted EBITDA generated by the Company’s segments, offset by a $1.0
million increase in shareholder transaction costs, a non-cash
remeasurement gain of $3.0 million recognized in the second quarter of
2016 which did not re-occur in 2017, a $1.1 million impairment charge
recorded in the second quarter of 2017 primarily related to historical
IT investments, and a $0.8 million increase in acquisition-related
amortization expense.

GAAP net (loss) for the first half of 2017 totaled $(0.9) million,
compared to net income of $1.3 million in the first half of 2016. The
$2.2 million decrease in income is largely due to $6.2 million of
incremental Adjusted EBITDA generated by the Company’s segments, offset
by a non-cash remeasurement gain of $3.6 million recognized in the first
half of 2016 which did not re-occur in 2017, a $1.3 million increase in
interest expense, a $1.1 million impairment charge recorded in the first
half of 2017 primarily related to historical IT investments, a $2.7
million increase in acquisition- and capital investment-related
depreciation and amortization, a $1.1 million increase in income tax
expense, and a $1.6 million decrease in share-based compensation expense
which primarily related to the March 29, 2016 majority ownership
purchase of common stock by Tahoe Investment Group Co., Ltd. (“Tahoe”)
from Alliance’s former shareholders.

GAAP net (loss) per share for the second quarter of 2017 was $(0.03) per
share, compared to GAAP net income per diluted share of $0.23 in the
second quarter of 2016. Adjusted Net Income Per Share was $0.43 and
$0.37 for the second quarters of 2017 and 2016, respectively. GAAP net
income per share on a diluted basis was impacted by net charges of $0.46
and $0.14 in the second quarters of 2017 and 2016, respectively, which
were comprised of: severance and related costs; restructuring charges;
transaction costs; shareholder transaction costs; impairment charges;
deferred financing costs in connection with shareholder transaction;
legal matters (income) expense, net; changes in fair value of contingent
consideration related to acquisitions; other non-cash benefits, net; and
differences in the GAAP income tax rate from the Company’s historical
income tax rate of 42.5%.

GAAP net (loss) per share in the first half of 2017 was $(0.08) per
share, compared to GAAP net income per diluted share of $0.12 in the
first half of 2016. Adjusted Net Income Per Share was $0.60 and $0.42
for in the first half of 2017 and 2016, respectively. GAAP net income
per share on a diluted basis was impacted by net charges of $0.68 and
$0.30 in the first half of 2017 and 2016, respectively, which were
comprised of: severance and related costs; restructuring charges;
transaction costs; shareholder transaction costs; impairment charges;
deferred financing costs in connection with shareholder transaction;
legal matters (income) expense, net; changes in fair value of contingent
consideration related to acquisitions; other non-cash benefits, net; and
differences in the GAAP income tax rate from the Company’s historical
income tax rate of 42.5%.

Cash flows provided by operating activities totaled $29.6 million for
the second quarter 2017, compared to $35.2 million in the second quarter
of 2016. Total capital expenditures, including cash paid for equipment
purchases, deposits on equipment and capital leases, totaled $15.4
million for the second quarter 2017 compared to $27.2 million in the
second quarter of 2016. Growth capital expenditures totaled $8.0 million
and maintenance capital expenditures totaled $7.4 million in the second
quarter of 2017.

Cash flows provided by operating activities totaled $49.5 million in the
first half 2017, compared to $57.9 million in the first half of 2016.
Total capital expenditures, including cash paid for equipment purchases,
deposits on equipment and capital leases, totaled $22.7 million in first
half of 2017 compared to $49.3 million in the first half of 2016. Growth
capital expenditures totaled $11.9 million and maintenance capital
expenditures totaled $10.8 million in the first half of 2017.

Alliance’s gross debt, defined as total long-term debt (including
current maturities but excluding the impact of deferred financing costs)
decreased $11.3 million to $561.9 million at June 30, 2017 from $573.2
million at December 31, 2016. Cash and cash equivalents were $22.7
million at June 30, 2017 and $22.2 million at December 31, 2016.

Alliance’s total debt, as defined above, divided by the last twelve
months Consolidated Adjusted EBITDA was 3.95x for the twelve months
ended June 30, 2017, compared to 4.03x for the year ended December 31,
2016 and 4.15x for the twelve months ended June 30, 2016.

Full Year 2017 Guidance

Based on Alliance’s results thus far this year, the Company reaffirmed
full year 2017 guidance ranges as follows:

(in millions)

Ranges

Revenue

$529 - $540

Adjusted EBITDA

$135 - $140

Capital expenditures

$54 - $70

Maintenance

$30 - $35

Growth

$24 - $35

Decrease in long-term debt, net of the change in cash and cash
equivalents (before investments in acquisitions), before growth
capital expenditures or “free cash flow before growth capital
expenditures”

$50 - $55

Decrease in long-term debt, net of the change in cash and cash
equivalents (before investments in acquisitions), after growth
capital expenditures or “free cash flow after growth capital
expenditures”

$19 - $26

No Second Quarter 2017 Earnings Conference Call

Due to the Company’s announcement on April 11, 2017 of the signing of a
definitive merger agreement to become an indirect wholly owned
subsidiary of Tahoe and the scheduled shareholder vote set for August
15, 2017, Alliance will not have a conference call to discuss the
quarterly results.

Definition of Non-GAAP Measures

Total Adjusted EBITDA and Adjusted Net Income Per Share are not measures
of financial performance under generally accepted accounting principles
in the United States (“GAAP”).

For a more detailed discussion of these non-GAAP financial measures and
a reconciliation to the most directly comparable GAAP financial measure,
see the section entitled “Non-GAAP Measures” included in the tables
following this release.

About Alliance HealthCare Services

Alliance HealthCare Services (NASDAQ: AIQ) is a leading national
provider of outsourced medical services including radiology, oncology
and interventional. We partner with healthcare providers and hospitals
to provide a full continuum of services from mobile to fixed-site to
comprehensive service line management and joint venture partnerships. We
also operate freestanding clinics and ASCs that are not owned by
hospitals or providers.

As of June 30, 2017, Alliance operated 609 diagnostic radiology,
radiation therapy, and interventional radiology systems, including 99
fixed-site radiology centers across the country, and 36 radiation
therapy centers and stereotactic radiosurgery (“SRS”) facilities. With a
strategy of partnering with hospitals, health systems and physician
practices, Alliance provides quality clinical services for over 1,100
hospitals and other healthcare partners in 46 states, where
approximately 2,450 Alliance Team Members are committed to providing
exceptional patient care and exceeding customer expectations. For more
information, visit www.alliancehealthcareservices-us.com.

Forward-Looking Statements

This press release contains forward-looking statements relating to
future events, including statements related to the Company’s long-term
growth strategy and efforts to diversify its business model, the
Company’s plans to expand its Interventional Division, both organically
and through one or more acquisitions, the Company’s expectations
regarding growth across the Company’s divisions, the expansion of its
service footprint and revenue growth, maximizing shareholder value, and
the Company’s Full Year 2017 Guidance, including its forecasts of
revenue, Adjusted EBITDA, capital expenditures, and decrease in
long-term debt. In this context, forward-looking statements often
address the Company’s expected future business and financial results and
often contain words such as “expects,” “anticipates,” “intends,”
“plans,” “believes,” “seeks” or “will.” Forward-looking statements by
their nature address matters that are uncertain and subject to risks.
Such uncertainties and risks include: changes in the preliminary
financial results and estimates due to the restatement or review of the
Company’s financial statements; the nature, timing and amount of any
restatement or other adjustments; the Company’s ability to make timely
filings of its required periodic reports under the Securities Exchange
Act of 1934; issues relating to the Company’s ability to maintain
effective internal control over financial reporting and disclosure
controls and procedures; the Company’s high degree of leverage and its
ability to service its debt; factors affecting the Company’s leverage,
including interest rates; the risk that the counterparties to the
Company’s interest rate swap agreements fail to satisfy their
obligations under these agreements; the Company’s ability to obtain
financing; the effect of operating and financial restrictions in the
Company’s debt instruments; the Company’s ability to comply with
reporting obligations and other covenants under the Company’s debt
instruments, the failure of which could cause the debt to become due;
the accuracy of the Company’s estimates regarding its capital
requirements; the effect of intense levels of competition and
overcapacity in the Company’s industry; changes in the methods of third
party reimbursements for medical imaging, oncology and interventional
services; fluctuations or unpredictability of the Company’s revenues,
including as a result of seasonality; changes in the healthcare
regulatory environment; the Company’s ability to keep pace with
technological developments within its industry; the growth or lack
thereof in the market for radiology, oncology, interventional and other
services; the disruptive effect of hurricanes and other natural
disasters; adverse changes in general domestic and worldwide economic
conditions and instability and disruption of credit and equity markets;
difficulties the Company may face in connection with recent, pending or
future acquisitions, including unexpected costs or liabilities resulting
from the acquisitions, diversion of management’s attention from the
operation of the Company’s business, costs, delays and impediments to
completing the acquisitions, and risks associated with integration of
the acquisitions; and other risks and uncertainties identified in the
Risk Factors section of the Company’s Form 10-K for the year ended
December 31, 2016, filed with the Securities and Exchange Commission
(the “SEC”), as may be modified or supplemented by the Company’s
subsequent filings with the SEC. These uncertainties may cause actual
future results or outcomes to differ materially from those expressed in
the Company’s forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company does not undertake to update its
forward-looking statements except as required under the federal
securities laws.

ALLIANCE HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Revenues

$

137,261

$

125,317

$

267,197

$

249,041

Costs and expenses:

Cost of revenues, excluding depreciation and amortization

78,154

69,939

153,203

140,853

Selling, general and administrative expenses

22,003

23,175

45,538

48,440

Transaction costs

152

431

314

848

Shareholder transaction costs

2,523

1,498

3,392

2,507

Severance and related costs

389

708

1,023

2,424

Impairment charges

1,085

—

1,085

—

Depreciation expense

13,783

13,730

27,856

26,778

Amortization expense

3,274

2,494

6,549

4,937

Interest expense, net

8,937

8,872

17,637

16,367

Other income, net

(394

)

(3,546

)

(877

)

(4,334

)

Total costs and expenses

129,906

117,301

255,720

238,820

Income before income taxes, earnings from unconsolidated
investees, and noncontrolling interest

7,355

8,016

11,477

10,221

Income tax expense

2,379

2,221

2,376

1,275

Earnings from unconsolidated investees

(367

)

(393

)

(703

)

(645

)

Net income

5,343

6,188

9,804

9,591

Less: Net income attributable to noncontrolling interest

(5,654

)

(3,729

)

(10,729

)

(8,322

)

Net (loss) income attributable to Alliance HealthCare Services, Inc.

$

(311

)

$

2,459

$

(925

)

$

1,269

Comprehensive (loss) income, net of taxes:

Net income

5,343

6,188

9,804

9,591

Unrealized (loss) gain on hedging transactions, net of taxes

(19

)

84

(6

)

46

Reclassification adjustment for losses realized and included in
net income, net of taxes

Changes in equipment purchases in accounts payable and accrued
equipment

(1,446

)

352

Note payable assumed in connection with acquisition

2,954

—

Noncontrolling interest assumed in connection with acquisitions

488

2,948

Fair value of contingent consideration related to acquisitions

—

420

ALLIANCE HEALTHCARE SERVICES, INC.NON-GAAP MEASURES

Total Adjusted EBITDA and Adjusted Net Income Per Share (the “Non-GAAP
Measures”) are not measures of financial performance under generally
accepted accounting principles in the U.S. (“GAAP”).

Total Adjusted EBITDA, as defined by the Company’s management, is
consistent with the definition in the Company’s Credit Agreement and
represents net (loss) income before: income tax expense; interest
expense, net; depreciation expense; amortization expense; share-based
payment; severance and related costs; net income attributable to
noncontrolling interest; restructuring charges; transaction costs;
shareholder transaction costs; impairment charges; legal matters
(income) expense, net; changes in fair value of contingent consideration
related to acquisitions; and other non-cash (benefits) charges, net,
which include non-cash gain on sale of assets, net. The components used
to reconcile net (loss) income to Total Adjusted EBITDA are consistent
with Company’s historical presentation of Total Adjusted EBITDA.

Adjusted Net Income Per Share, as defined by the Company’s management,
represents net (loss) income, on a diluted basis, before: severance and
related costs; restructuring charges; transaction costs; shareholder
transaction costs; impairment charges; deferred financing costs in
connection with shareholder transaction; legal matters (income)
expenses, net; changes in fair value of contingent consideration related
to acquisitions; other non-cash benefits, net; and differences in the
GAAP income tax rate compared to the Company’s historical income tax
rate. The components used to reconcile net (loss) income per share to
Adjusted Net Income Per Share are consistent with Company’s historical
presentation of Adjusted Net Income Per Share.

Management uses the Non-GAAP Measures, and believes they are useful
measures for investors, for a variety of reasons. Management regularly
communicates the results of its Non-GAAP Measures and management’s
interpretation of such results to its board of directors. Management
also compares the Company’s results of its Non-GAAP Measures against
internal targets as a key factor in determining cash incentive
compensation for executives and other employees, largely because
management feels that these measures are indicative of how its
radiology, oncology and interventional businesses are performing and are
being managed. The diagnostic imaging and radiation oncology industry
continues to experience significant consolidation. These activities have
led to significant charges to earnings, such as those resulting from
acquisition costs, and to significant variations among companies with
respect to capital structures and cost of capital (which affect interest
expense) and differences in taxation and book depreciation of facilities
and equipment (which affect relative depreciation expense), including
significant differences in the depreciable lives of similar assets among
various companies. In addition, management believes that because of the
variety of equity awards used by companies, the varying methodologies
for determining non-cash share-based compensation expense among
companies and from period to period, and the subjective assumptions
involved in that determination, excluding non-cash share-based
compensation from Adjusted EBITDA enhances company-to-company
comparisons over multiple fiscal periods and enhances the Company’s
ability to analyze the performance of its radiology, oncology and
interventional businesses.

In the future, the Company expects that it may incur expenses similar to
the excluded items discussed above. Accordingly, the exclusion of these
and other similar items in the Company’s non-GAAP presentation should
not be interpreted as implying that these items are non-recurring,
infrequent or unusual. The Non-GAAP Measures have certain limitations as
analytical financial measures, which management compensates for by
relying on the Company’s GAAP results to evaluate its operating
performance and by considering independently the economic effects of the
items that are or are not reflected in the Non-GAAP Measures. Management
also compensates for these limitations by providing GAAP-based
disclosures concerning the excluded items in the Company’s financial
disclosures. As a result of these limitations and because the Non-GAAP
Measures may not be directly comparable to similarly titled measures
reported by other companies, however, the Non-GAAP Measures should not
be considered as an alternative to the most directly comparable GAAP
measure, or as an alternative to any other GAAP measure of operating
performance.

The calculation of Total Adjusted EBITDA is shown below:

Three Months Ended June 30,

Six Months Ended June 30,

Twelve Months Ended June 30,

(in thousands)

2017

2016

2017

2016

2017

Net (loss) income attributable to Alliance HealthCare Services,
Inc.

$

(311

)

$

2,459

$

(925

)

$

1,269

$

(1,701

)

Income tax expense

2,379

2,221

2,376

1,275

3,953

Interest expense, net

8,937

8,872

17,637

16,367

35,776

Depreciation expense

13,783

13,730

27,856

26,778

56,050

Amortization expense

3,274

2,494

6,549

4,937

12,173

Share-based payment (included in “Selling, general and
administrative expenses”)

The Company utilizes same-store volume growth as a historical
statistical measure of the MRI and PET/CT imaging procedure, linear
accelerator (“Linac”) treatment and SRS case growth at its customers in
a specified period on a year-over-year basis. Same-store volume growth
is calculated by comparing the cumulative scan, treatment or case volume
at all locations in the current year quarter to the same quarter in the
prior year. The group of customers whose volume is included in the scan,
treatment or case volume totals is only those that received service from
Alliance for the full quarter in each of the comparison periods. A
positive percentage represents growth over the prior year quarter and a
negative percentage represents a decline over the prior year quarter.
Alliance measures each of its major radiology and oncology modalities
(MRI, PET/CT, Linac and SRS) separately.

The Radiology Division same-store volume growth (decline) for the last
four calendar quarters ended June 30, 2017 is as follows:

Same-Store Volume

MRI

PET/CT

2017

Second quarter

(0.3

)%

6.6

%

First quarter

(0.7

)%

5.8

%

2016

Fourth quarter

(1.2

)%

5.8

%

Third quarter

1.1

%

5.3

%

The Oncology Division same-store volume growth (decline) for the last
four calendar quarters ended June 30, 2017 is as follows: